Industrials sector comment – June 2011

Dato

Fears of a double-dip recession in the oil and gas industry have faded, spurring a sharp rise in M&A activity involving suppliers of oilfield products and services.

Strong commodity prices are supporting the need for yet more specialist engineering skills and many large players in the oilfield services market are on the hunt for bolt-on acquisitions. Strong credit markets and balance sheets are supporting the upward trend in deal volumes as many players seek to tap into the growth in natural gas exploration and production in unconventional formations. At the same time, offshore exploration in pre-salt formations off Africa and Brazil are driving geographic expansion strategies, whilst subsea activity in deep water locations is gathering pace.

Despite the changes to the tax regime locally, the ability of UK companies to play on the global stage makes them attractive targets for overseas groups. The acquisition of asset integrity specialist RBG by Stork Technical Services exemplifies how much competition there is for UK assets. RBG may have offices in Aberdeen, Humberside, Liverpool and Teesside but its next biggest operations are in Azerbaijan and Kazakhstan, with Trinidad & Tobago not far behind. The company’s technical expertise in asset maintenance, combined with this global reach, brought it onto the radar of both trade and private equity purchasers in a hotly-contested process. We expect this dynamic to be replicated as other acquisitions targets come to market and the pipeline of M&A activity builds in the sector.

Deals

Hill & Smith Holdings plc has acquired ATA AB, a Swedish manufacturer of road safety barriers and road signage. The £9.8m acquisition will complement Hill & Smith’s temporary road safety barrier rental model and will provide the group with a platform for future growth across Scandinavia.

EnCore Composites Holdings Inc has acquired BAE Systems plc’s Composite Structures business in Brea, California. The unit is a designer and manufacturer of complex, highly-engineered composite components and assemblies for commercial aerospace and defence platforms. It was acquired as part of BAE’s acquisition of United Defense Inc in 2005.

Yorkshire Bank has supported the management buy-out of Corrosion Resistant Products Ltd (CRP), a UK manufacturer of corrosion-resistant pipes and fittings. The company is a supplier of a range of products that are pre-coated with corrosion resistant-resins for applications in the chemical and pharmaceutical sectors.

Mors Smitt NV has acquired the railway products business of Key Technologies plc. The target is a UK manufacturer of railway signalling relays and train protection warning systems. Key Technologies is owned by UK industrial investor Grove Industries, whilst Mors Smitt is backed by French private equity firm OFI Private Equity.

Halma plc has acquired Kirk Key Interlock Company LLC from Owens Holdings LLC for £9m. Kirk Key is a US manufacturer of interlock systems for the protection of personnel and equipment which will complement the Safety Interlock businesses within the Industrial Safety division of Halma.

Rockwell Automation Inc has acquired Lektronix Ltd, a UK provider of industrial automation maintenance and repair services. Lektronix specialised in aftermarket services for CNC equipment, electric motor drives, industrial computers and programmable logic controllers for production equipment used in a range of industries. The business will complement Rockwell’s Control Products & Solutions division as it expands its service offering across Europe and emerging markets.

AMEC plc has acquired MACTEC Inc, a US provider of consulting engineering and environmental services. The £170m acquisition will complement AMEC’s existing Earth & Environmental division and offer it a stronger presence in Canada and the Western US. The transaction provides an exit for US private equity firm Nautic Partners.

Lamprell plc has acquired Maritime Industrial Services Co Ltd (MIS), a UAE provider of diversified engineering and contracting services to the energy industry. The £208m acquisition will enhance Lamprell’s presence in the Middle Eastern market and allow the group to expand its construction, EPC, fabrication, refurbishment, safety and technical services for the oil and gas industry.

UK private equity firm Meridian Equity has backed the management buy-out of International Pipeline Products Ltd (IPP) from Pan Atlanta Developments Ltd. IPP is a UK designer and manufacturer of pipeline maintenance and testing equipment.

Acteon Group Ltd has acquired NCS Survey Ltd, a UK provider of offshore construction-support, rig-positioning and subsea-visualisation services. NCS with enhance Acteon’s presence in the subsea market through the addition of the target’s capabilities in autonomous, remote surveying services for the upstream oil and gas and offshore wind sectors.

Stork Group NV has acquired RBG Ltd, a UK provider of support services to the oil and gas industry. With its focus on access solutions, fabric maintenance, inspections and oil platform decommissioning, RBG will complement Sotrk’s Technical Services division. The transaction provides an exit for UK private equity firm 3i. Stork is backed by UK private equity firm Arle Capital Partners, formerly Candover Partners.

Bunzl plc has acquired the safety and workwear business of SIG plc. The acquisition will complement Bunzl’s existing activities involved in the supply of hygiene products, protective equipment and workwear.

Px Group Ltd has acquired Simpson Coulson Ltd, a UK provider of multi-disciplinary consulting engineering and project management services. The acquisition will allow Px to develop its international business and penetrate the metals, petrochemical, pharmaceutical, waste and water sectors.

Bibby Group Ltd has acquired Electrothermal Engineering Ltd from Thermo Fisher Scientific Inc. The target is a manufacturer of electrical heating and measuring equipment which will be integrated into the group’s Bibby Scientific division.

UK private equity firm Exponent Private Equity has acquired Pattonair Ltd from UMECO plc for £146m. Pattonair is a UK provider of components and parts supply chain management services for the aerospace industry. The transaction will allow UMECO to focus on its core composites business and the exploitation of new growth opportunities in the aerospace, automotive, defence, marine and wind energy sectors.